From an investment standpoint, the fundamental problem with timeshares is that they’re overpriced, and like a condominium, you own no land (which is what generally appreciates well over time). For example, suppose that a particular unit would cost $150,000 to buy. When this unit is carved up into weekly ownership units, the total cost of all those units can easily approach four to five times that amount!
To add insult to injury, investors find that another problem with timeshares is the high maintenance or annual service fees. Is it worth buying a slice of real estate at a 400 to 500 percent premium to its fair market value and pay high fees on top of that? We don’t think so.
Many owners of timeshares find that they want to vacation at a different location or time of year than what they originally purchased. To meet this need, several companies offer to broker or sell timeshare slots. However, timeshare availability and desirability have so many variables — including location, time of year, and quality of the particular resort — that it has been difficult to fairly value and trade timeshares. As a result, resort rating sys- tems have been developed (Resorts Condominiums International and Interval International are two of the most well known) to compare resort location, amenities, and quality.
The developers and operators of condo hotels love the concept because
one of the most consistently successful principles of real estate is increasing value by fractionalizing interests in real estate. As with timeshares, the devel- opers are able to sell each individual hotel room for much more than they could get for the entire project.
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